Correlation Between LAir Liquide and Dupont De

Can any of the company-specific risk be diversified away by investing in both LAir Liquide and Dupont De at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining LAir Liquide and Dupont De into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LAir Liquide SA and Dupont De Nemours, you can compare the effects of market volatilities on LAir Liquide and Dupont De and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in LAir Liquide with a short position of Dupont De. Check out your portfolio center. Please also check ongoing floating volatility patterns of LAir Liquide and Dupont De.

Diversification Opportunities for LAir Liquide and Dupont De

0.32

Correlation Coefficient

LAir Liquide  Dupont De

Weak diversification

The 3 months correlation between LAir and Dupont is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding LAir Liquide SA and Dupont De Nemours in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dupont De Nemours and LAir Liquide is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on LAir Liquide SA are associated (or correlated) with Dupont De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dupont De Nemours has no effect on the direction of LAir Liquide i.e., LAir Liquide and Dupont De go up and down completely randomly.

Pair Corralation between LAir Liquide and Dupont De

Assuming the 90 days horizon LAir Liquide SA is expected to generate 0.97 times more return on investment than Dupont De. However, LAir Liquide SA is 1.03 times less risky than Dupont De. It trades about 0.2 of its potential returns per unit of risk. Dupont De Nemours is currently generating about 0.01 per unit of risk. If you would invest  16,172  in LAir Liquide SA on December 27, 2024 and sell it today you would earn a total of  3,117  from holding LAir Liquide SA or generate 19.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

LAir Liquide SA  vs.  Dupont De Nemours

LAir Liquide SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LAir Liquide SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, LAir Liquide reported solid returns over the last few months and may actually be approaching a breakup point.

Dupont De Nemours

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with LAir Liquide and Dupont De

The main advantage of trading using opposite LAir Liquide and Dupont De positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LAir Liquide position performs unexpectedly, Dupont De can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dupont De will offset losses from the drop in Dupont De's long position.

The idea behind LAir Liquide SA and Dupont De Nemours pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.